Abstract
A financial crisis is manifested as a crash in any number of asset prices or as a banking crisis and a freezing of credit. These crises have serious economic fallout—sharp and prolonged decline in economic output and a spike in unemployment—as an impaired financial system spares no sector of the economy and deleveraging takes time. There is no shortage of explanations for financial crises: moral failure, fraud, Ponzi schemes, lax regulations, supervision and enforcement, prolonged period of low interest rates, government bailouts of “too big to fail” institutions enabling excessive risk taking, economic shocks, animal spirits, rapid rise in debt, and the list goes on. To our mind, the real culprits of financial crises are (i) preeminence of interest-rate-based debt contracts and (ii) fractional reserve banking.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
